Barry Greenstein Talks Bad Actor Clause and PokerStars

Ever since Nevada became the first US state to launch online gaming, the “bad actor” clause has been a major source of controversy. Many see this as a rule designed to prevent competition and keep PokerStars out of the US gaming market, at least for the time being. Others, such as 888 CEO Brian Mattingley, believe that the bad actor clause imposes a fair penalty for the advantage that PokerStars gained by violating the UIGEA.

After being purchased by Amaya Gaming, Stars has a better chance of shedding its bad actor reputation. Nevertheless, they are still barred from New Jersey for the immediate future and banned from Nevada for almost a decade. So is this fair?

3-time WSOP champ Barry Greenstein is certainly one person who doesn’t think so. Greenstein isn’t exactly unbiased in his defense of Stars – he is, after all, a member of Team PokerStars. But in a blog post that we recently stumbled upon, the “Robin Hood of Poker” does attempt to use some decent logic to argue his point. That said, let’s look at Greenstein’s interpretation of the bad actor clause subject and if there are any holes in his logic.

Greenstein uses PokerStars’ Actions in Washington State to back his Argument

The first thing that Greenstein points out is how the bad actor language is written to punish companies that operated in the US after 2006, when the UIGEA was imposed. However, he writes that the UIGEA only “prohibited financial transactions related to illegal gambling.” Since poker has a skill element, Greenstein believes that labeling the game as illegal gambling is sketchy.

The poker pro continues to discuss how Stars had lawyers working for them, closely examining US state laws to ensure that they weren’t violating them. He writes, “One example is when the state of Washington passed a law banning online poker, PokerStars pulled out of the state.”

The big hole in this argument, though, is that Stars waited over four years after June 7th, 2006, when Washington state originally passed a law banning online poker. The world’s largest internet poker site only cut ties with Washington when the state won a challenge against the law in 2010.

Greenstein discusses PokerStars’ honest financial dealings

While Stars definitely violated the poker law in Washington, they did at least make sure that player money was always safe. Greenstein discusses how his sponsor ring-fenced player funds, as opposed to Full Tilt Poker, which went bankrupt after Black Friday, by writing the following:

Part of the Black Friday case had already settled for hundreds of millions of dollars, and PokerStars bought Full Tilt in the process, saving the DOJ a big headache by paying Full Tilt’s $186 million debt to non-U.S. players and putting up the funds for Full Tilt’s US players to be repaid by the Government.

The Bad Actor Clause is No Simple Matter

Bailing Full Tilt players out by purchasing the failed poker site should definitely earn some goodwill points for Stars. But is merely being better than Full Tilt from an ethical point enough to get PokerStars licensed in the US?

Clearly Greenstein thinks so as he explained by writing, “From a legal standpoint, it doesn’t look like PokerStars did anything wrong. So now other gaming companies argue that you can’t let PokerStars into the market because one of their founders is still under indictment.” He adds that many of these legal decisions are “bought,” rather than made by the government on an ethical level.

Another point that Greenstein makes is how he’s talked to top management from other online gaming sites, who admit they don’t want to compete against PokerStars. So this is certainly a driving force behind the bad actor clause. But as Mattingley discussed in a series of interviews over the summer, Stars did gain a major advantage by continuing to operate in the US (even illegally in Washington). And as he puts it, a “six-month, one or two-year ban” would be fair.

So the bad actor clause isn’t all about anti-competitiveness, but rather also about whether Stars did indeed gain an edge by ignoring the murky UIGEA. Whatever the case may be, it looks like PokerStars stands a good chance of getting into New Jersey’s online gaming market in the near future.